FM-BINUS-AA-FPU-78/V2R0

BINUS University

Academic Career: Class Program:

Undergraduate / Master / Doctoral *) International/Regular/Smart Program/Global Class*)

√ Mid Exam  Final Exam Term : Odd/Even/Short *)

 Short Term Exam  Others Exam : _____________

√ Kemanggisan √ Alam Sutera √ Bekasi Academic Year :

 Senayan  Bandung  Malang 2021 / 2022

Faculty / Dept. : Economics & Communication & School of Deadline Day / Date : Monday / 29 Nov 2021
Information Systems / Accounting & Time : 13:00:00
Finance ; Accounting & Information
Systems
Code - Course : ACCT6083020 / ACCT6083003 - Class : LA16, LA53, LA55,
Advanced Accounting LB53, LB55, LC53,
LD53, LE53, LF53, LG53
Lecturer : Team Exam Type : Online

) Strikethrough the unnecessary items
The penalty for CHEATING is DROP OUT!!!

INFORMATION :
• LO 1: Explain the concept of business combination, concept of group reporting, and
insolvency
• LO 2: Prepare The Consolidated Financial Statement on the Date and After the
Acquisition
• LO 3: Prepare Consolidated Working Papers for Inter Company Sales of Inventory,
Property, Equipment, and Bond using Cost and Complete Equity Methods

1a. (10 marks) (LO1) Under the economic entity concept, the net assets of the subsidiary will
be recorded at their fair value that is implied by the price paid by the parent company in their
consolidated financial statements. What will the conceptual problems be if those valuation
approaches are implemented?

b. (5 marks) (LO1) Since its enactment, PSAK 22: Business Combinations must be applied to all
acquisitions. Explain how the treatment for goodwill should be based on PSAK 22.

c. (10 marks) (LO1) From a consolidated point of view, when should the profit be recognized
on intercompany sales of depreciable assets and non-depreciable assets?

2.(34 marks) (LO2) On July 1, 2014, Pipe Corporation issued 23,000 shares of its own $2 par
value common stock for 40,000 shares of the outstanding stock of Sector Inc. in an
acquisition. Pipe common stock at July 1, 2014 was selling at $16 per share. Just before the
business combination, balance sheet information of the two corporations was as follows:

Pipe Sector Sector

Verified by,

[Silvia Dewiyanti] (D5893) and sent to Department/Program on OCT 31, 2021

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 FM-BINUS-AA-FPU-78/V2R0
Book Book Fair
Value Value Value
Cash $25,000 $17,000 $17,000
Inventories 55,000 42,000 47,000
Other current assets 110,000 40,000 30,000
Land 100,000 45,000 35,000
Plant and equipment-net 660,000 220,000 280,000
$950,000 $364,000 $409,000

Liabilities $220,000 $70,000 $75,000

Capital stock, $2 par value 500,000 100,000
Additional paid-in capital 170,000 90,000
Retained earnings 60,000 104,000
$950,000 $364,000

Required:
1. Prepare the journal entry on Pipe Corporation's books to account for the investment in
Sector Inc. (6 marks)

2. Prepare a consolidated balance sheet for Pipe Corporation and Subsidiary immediately
after the business combination. (28 marks)

3. (13 marks) (LO3) Peter Corporation acquired an 80% interest in Stern Corporation several
years ago when the book values and fair values of Stern's assets and liabilities were equal. At
the time of acquisition, the cost of the 80% interest was equal to 80% of the book value of
Stern's net assets. Separate company income statements for Peter and Stern for the year
ended December 31, 2014 are summarized as follows:

Peter Stern
Sales Revenue $1,000,000 $600,000
Investment income from Stern 85,000
Cost of Goods Sold (600,000) (300,000)
Expenses (200,000) (200,000)
Net Income $285,000 $100,000

During 2013, Peter sold merchandise that cost $120,000 to Stern for $180,000. Half of this
merchandise remained in Stern's inventory at December 31, 2013. During 2014, Peter sold
merchandise that cost $150,000 to Stern for $225,000. One-third of this merchandise
remained in Stern's December 31, 2014 inventory.

Required:
Prepare a consolidated income statement for Peter Corporation and Subsidiary for 2014.

Verified by,

[Silvia Dewiyanti] (D5893) and sent to Department/Program on OCT 31, 2021

Page 2 of 3
 FM-BINUS-AA-FPU-78/V2R0
4. (16 points) (LO3) Paka Corporation owns an 80% interest in Sandra Company. Paka acquired
Sandra's bonds on January 2, 2014. The following information is from the adjusted trial
balances at December 31, 2014, at which time the bonds have three years to maturity. The
bonds have interest payment dates of January 1 and July 1. Straight-line amortization is used
by both companies.

Paka Sandra
Investment in Sandra Bonds, $100,000 par 98,500
7% Bonds payable, $200,000 200,000
Bond premium 6,000
Interest expense 12,000
Interest receivable 7,000
Interest income 7,500
Interest payable 7,000

Required:
Prepare the necessary consolidation working paper entries on December 31, 2014 with
respect to the intercompany bonds.

5. (12 marks) (LO1) In 1 January 2016, PT ABC paid Rp 2 million for 30% shares of PT Willow.
Accumulated loss of PT Willow for 3 years ended 31 Dec 2018 is Rp 10 million.
Based on PSAK 15, Explain how these transactions will be recorded in the book of PT ABC.

GOOD LUCK
- It’s always seem impossible until its done - Nelson Mandela

Verified by,

[Silvia Dewiyanti] (D5893) and sent to Department/Program on OCT 31, 2021

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